Thread by @RamsayRippers

🧵Options Thread🧵

Here's a little EDU for anyone wanting to branch out into trading Options.

What are Options Contract?

An option is a two-party contract that conveys a right to the buyer and an obligation to the seller.

In this thread, I'll be more focused on buying than playing spreads and naked calls & puts

Call Options:

Buying calls - A buyer of calls owns the right to buy 100 shares of a specific stock at the strike price before expiration if he/she chooses to exercise. The buyer can also sell the option.

Put Options:

Buying puts - A buyer of puts owns the right to buy 100 shares of a specific stock at the strike price before expiration if he/she chooses to exercise. The buyer can also sell the option.

Buyers of options are in full control throughout the trade. You can choose to exercise or to exercise your contracts... This is why the buyer pays premiums.

Premiums are the cost of the contract.

Buyers = Pay Premium
Sellers = Receives Premium

Three Specifications of every options contract:

1. Underlying Instrument - For this thread, we're focussing on common stock
2. Price - Or Strike at which purchase/sale of the underlying security will occur
3. Expiration - The date the options contract(s) expire

Buyers & Sellers

Buyers = Long = Holder
-Pays premium to the seller
-Opens position with a debit to account
-Has the right to exercise

Sellers = Short = Writer
-Receives premium from buyer
-Opens position with a credit to account
-Has obligation when contract is exercised

This is a pretty introductory thread to the game of Options. For beginners that found some value from this thread, I'm more than happy to dive deeper into more intermediate and advanced topics.

Feel free to share this with someone who wants to get into Options!

GIVES YOU THE RIGHT TO SELL 100 SHARES

not buy, SELL. Spelling error!!!